6.3 Types of Financial Institution 金融机构的类型

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1 Depository Institutions 存款型金融机构

Depository institutions are critically important financial intermediaries. They issue checking, savings, and time deposits. They then use the funds to make various types of loans and to purchase securities.

The depository institution category includes commercial banks, savings and loan associations, mutual savings banks, and credit unions. The latter three sometimes are combined and referred to as thrift institutions (thrifts)储蓄机构.

Commercial banks represent one of the largest groups of depository intermediaries, and their operations affect nearly everyone either directly or indirectly. Most individuals have at least one checking account or savings account at commercial bank, and many people have borrowed from banks to finance automobile purchases or use bank-issued credit cards.

Savings and loan associations (S&Ls) obtain funds by issuing passbook savings accounts and time deposits and use the funds mostly to grant long-term mortgage loans. S&Ls borrow short-term to finance long-term mortgages, so they are vulnerable when market forces drive interest rates sharply higher.

Mutual savings banks (MSBs) were established in the early nineteenth century to encourage saving by working-class Americans. Like S&Ls, MSBs obtain funds by issuing savings and time deposits and use the funds primarily to invest in mortgage.

Credit unions (CUs) operate as nonprofit businesses. They issue time deposits (“shares”) to members and use the funds chiefly to lend to other members. Loans usually are granted for home improvements or durable goods purchases. Like MSBs, CUs are “mutual”, that is, they are owned and run by the members (depositors). Advantages of CUs derive from low overhead expense.

2 Contractual Saving Institutions 契约型金融机构

Contractual saving institutions obtain funds under long-term contractual arrangements. They invest the funds predominantly in the capital market, that is, in long-term equity and debt instruments.

Contractual saving institutions include various types of insurance companies, private pension funds, and state and local government retirement funds.

Life insurance companies differ from other financial institutions in that they provide two services to individuals: insurance and savings. Broadly speaking, the purpose of life insurance is to provide a beneficiary, such as a spouse or family members, with protection against financial distress or insecurity that might result from the premature death of a “breadwinner”.

Fire and casualty insurance companies insure their policyholders against loss from theft, fire, and accidents. They are very much like life insurance companies, receiving funds through premiums for their policies, but they have a greater possibility of loss of funds if major disasters occur.

Pensions are retirement plans funded by corporations or government agencies for their workers that are administered primarily by the trust departments of commercial banks or by life insurance companies.

Some pension plans base their payoff on the amount of the worker’s wages shortly before retirement, so that the retirement benefits will be adequate to maintain an accustomed standard of living.

3 Investment Intermediaries 投资型金融机构

Mutual funds, finance companies, and money market mutual funds are primarily investment intermediaries involved in the purchase and sale of bonds, stocks, and other securities.

The benefits to investors include low transactions costs (obtained by buying in large blocks), financial expertise and experience supplied by mutual fund management, and increased diversification relative to that feasible for a typical individual.

Mutual funds accept money from savers and then use these funds to buy various types of financial assets, including stocks, long-term bonds, short-term debt instruments, and so forth. They reduce risks through diversification.

An open-end fund has the right to issue additional shares at its discretion. A closed-end fund cannot issue additional shares, and the owner cannot redeem the shares at market value from the fund itself. Instead, the shares in the fund are traded like common stocks in a secondary market(over the counter or through one of the stock exchanges).

Finance companies obtain funds by issuing commercial paper, borrowing from banks, and issuing shares of stock. They use the funds to make small loans to individuals and businesses. They gather and monitor information allowing them to estimate potential borrowers’ default risk.

MMMFs use funds to purchase large blocks of liquid money market instruments, such as commercial paper, treasury bills, repurchase agreements, and negotiable CDs. So MMMF shares are relatively safe because they invest in instruments of very low default risk. MMMFs are investment-type intermediaries, but they clearly have some characteristics of depository institutions.

Checkpoint:

Describe how mutual funds provide services related to risk sharing and liquidity. Distinguish mutual funds from a bank.